Greek banks will not open today and ATM limits will be reduced

People
line up at an ATM outside a National Bank branch in Athens,
Greece, July 3, 2015.Reuters

Greece celebrated last night after the nation overwhelmingly
voted "No" – or "OXI" – in the country's bailout referendum. The
nation rejected its European creditors' demands and now the
country doesn't have enough money to pay back its debts.

My colleague Mike Bird reported live from Athens
that the win for No was dramatic — over 60% of the
country backed the government's proposal to reject the agreement
negotiated with the country's European creditors – and
thousands
of people streamed into Syntagma Square, the centre of Greek
political life, to celebrate the enormous rejection of the
country's bailout deal.

However, Greeks may find themselves a little bit more upset
on today (Monday July 6) when it's likely that Greece will keep
its banks closed and cut the cash withdrawal limit, according
to IHS Global Insight's senior economist Diego
Iscaro.

"All eyes will now be on the European Central
Bank tomorrow. We expect the central bank to
continue providing liquidity to Greece’s financial sector,
although the small chance of the ECB increasing the cap on the
emergency liquidity assistance this week has disappeared
with the referendum result," said Iscaro in a note
this evening.

"This significantly raises the probability of banks running out
of cash over the coming days. We estimate it is very likely banks
will not reopen on 7 July as currently expected. Moreover,
the limit on bank withdrawals, currently at €60, may also need to
be reduced."

One week ago Greece's government shockingly announced the bailout
referendum for Sunday July 5, and subsequently announced that the
banks would remain shut until after voting and restrict cash
machine withdrawals to prevent the nation draining the banks dry.

It has led to crazy long queues, pensioners crying on the
streets, and panic that people will lose their life savings
because of the likelihood that Greece will exit the euro and turn
to its old currency the drachma.

A man (L) puts money in
his wallet as people line up to withdraw cash from an ATM outside
a Eurobank branch in Athens, Greece June 28,
2015.REUTERS/Alkis
Konstantinidis

From the sounds of it from IHS Global
Insight's Iscaro, it could take a while for Greece's
government to turn the taps back on at the Greek ATMs and open
doors at the banks, as it starts negotiations effectively from
scratch as of Monday July 6.

"Negotiations will resume over the coming days but the
probability of a deal is distant. (Prime Minister Alexis)
Tsipras’ argument is that he can now go back to the lenders in a
stronger position," said Iscaro. "However,
we believe it is unlikely the creditors’ proposals will be
significantly relaxed as a result of the “no” vote. It will now
be impossible for the SYRIZA-led government to accept the deal
currently on the table, which means that the risk of a total
collapse in the negotiations has increased significantly.

"In our view, the only hope of a deal may rest on the IMF
convincing Eurozone governments to include a clause promising
debt relief in the future, conditional to Greece meeting certain
targets. This will be extremely difficult but lenders may come to
the conclusion that it is the only way to avoid Greece leaving
the eurozone."